J-A26038-19

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

WELLINGTON ENERGY, INC. 

Appellant

v.

CITIZENS BANK OF PENNSYLVANIA

v.

RAELISE OSTROWSKI

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 IN THE SUPERIOR COURT OF

 PENNSYLVANIA

 No. 499 WDA 2019

Appeal from the Judgment Entered April 5, 2019

In the Court of Common Pleas of Allegheny County Civil Division at 

No(s): GD 13-017836

BEFORE: SHOGAN, J., LAZARUS, J., and OLSON, J.

MEMORANDUM BY OLSON, J.: FILED MARCH 10, 2020

Appellant, Wellington Energy, Inc., appeals from the judgment entered 

on April 5, 2019. We affirm.

The trial court ably summarized the underlying facts and procedural 

posture of this case:

Raelise Ostrowski, an employee of Wellington Power 

Corporation,[1]forged indorsements on [264 of Appellant’s] 

checks, enabling her to steal $[375,628.62]. Ms. Ostrowski 

forged the indorsements from 2008 until she was caught in 

2013. Ms. Ostrowski was Wellington Power’s payroll 

administrator, which made her responsible for the payroll and 

____________________________________________

1 Wellington Power Corporation is Appellant’s parent corporation and it 

“oversees the administration, including the accounting and payroll functions, 

of” Appellant. Appellant’s Complaint, 12/11/13, at ¶¶ 8-9.
J-A26038-19

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“per diem” reimbursements as [Appellant’s] employees 

replaced between eight and ten million electrical meters in 

the State of California. Per diem checks, typically in the 

amount of $1,385 or $1,551.66, reimbursed approximately 

[15 or 20] employees monthly for their travel related 

expenses, such as mileage and housing. When Ms. Ostrowski 

found that an employee receiving per diem reimbursements 

separated from [Appellant] by way of resignation, 

retirement[,] or termination, she would continue to have per 

diem reimbursement checks issued to them.

Ms. Ostrowski then forged the indorsement signatures of the 

former employees on the backs of the checks and deposited 

them via automated teller machines into her own checking 

accounts with Citizens Bank and PNC Bank. For example, 

Zack Smith ended his employment with [Appellant] in 

September [] 2009, but Ms. Ostrowski continued to have 

monthly per diem reimbursement checks issued to Zack 

Smith until July [] 2013, when Citizens Bank discovered that 

checks she was depositing had forged signature 

indorsements. Ms. Ostrowski was then charged with the 

crime of mail fraud (18 U.S.C. § 1341), [pleaded] guilty[,] 

and served [24] out of a [27] month prison sentence.

In September [] 2013, [Appellant] began this civil lawsuit 

against Citizens Bank of Pennsylvania by writ of summons, 

which was followed in December by a complaint. Among 

other things, the complaint alleged that Citizens Bank owed 

[Appellant] $366,485.32 for failing to exercise ordinary care 

by accepting deposits into Ms. Ostrowski’s account of checks 

made payable to other individuals that contained forged 

indorsements. Citizens Bank joined Ms. Ostrowski as an 

additional defendant, alleging she should indemnify or 

contribute towards any liability of Citizens Bank to 

[Appellant]. . . .

In December [] 2017, the Honorable [Paul F. Lutty, Jr.]

granted Citizens Bank’s motion for partial summary judgment 

by prohibiting [Appellant’s] claims arising from all checks in 

bank statements made available to [Appellant] in July [] 2012 

or earlier. Judge Lutty’s ruling left intact [Appellant’s] claims 

[related to the] forged checks deposited between August [] 

2012 and July [] 2013.
J-A26038-19

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The dispute over the reduced amount of $109,581.66 was 

assigned to [the trial court judge, the Honorable Alan 

Hertzberg,] for resolution by way of a jury trial. After a trial 

of approximately three days, Citizens Bank withdrew its claim 

against Ms. Ostrowski. On [Appellant’s] claims against 

Citizens Bank, the jury returned a verdict in favor of Citizens 

Bank. [Specifically, the jury found that Citizens Bank did not 

fail to exercise ordinary care in this case. See Jury Verdict, 

11/30/18, at 1.]

Trial Court Opinion, 6/4/19, at 1-3 (footnotes and some capitalization 

omitted).

Following the denial of Appellant’s post-trial motion, Appellant filed a 

notice of appeal. Appellant raises three claims on appeal:

1) Did the [trial] court err when it applied the facially 

inapplicable provisions of 13 Pa.C.S.A. § 4406(f) to grant 

partial summary judgment and, thereby, to limit the scope of 

[Appellant’s] claims to a one-year lookback period?

2) Did the [trial] court err in permitting [Citizens Bank] to 

introduce as evidence customer agreements between other 

banks and their customers which were irrelevant, hearsay, 

unauthenticated, misleading and highly prejudicial?

3) Did the [trial] court err in not granting a mistrial or 

providing a limiting instruction when [Citizens Bank] made 

references to [Appellant’s] claims against [PNC Bank] in 

closing arguments in violation of [the trial court’s] order on 

[Appellant’s] pretrial motion in limine?

Appellant’s Brief at 4 (some capitalization omitted).

We have reviewed the briefs of the parties, the relevant law, the certified 

record, the notes of testimony, and the opinions of the able trial court judges, 

the Honorable Paul F. Lutty, Jr. and the Honorable Alan Hertzberg. We 

conclude that Appellant is not entitled to relief in this case, for reasons partially 
J-A26038-19

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expressed in Judge Lutty’s June 6, 2019 opinion2 and fully expressed in Judge 

Hertzberg’s June 4, 2019 opinion. Therefore, we affirm on the basis of Judge 

____________________________________________

2 Appellant claims that, in granting Citizens Bank’s motion for partial summary 

judgment, Judge Lutty erred by “limit[ing] the scope of [its] claims to a 

one-year lookback period.” Appellant claims that this error caused it prejudice 

because, during trial, Citizens Bank defended the action by pointing out “the 

long duration of the fraud” and by faulting Appellant for failing to catch the 

fraud earlier. Appellant’s Brief at 34-36. According to Appellant:

the wrongly-limited look-back period permitted the jury to 

consider [Citizens Bank’s] liability only for the final year –

after Ms. Ostrowski’s conduct had been continuing for years. 

In a trial without the prejudice of the one-year look-back 

period, the jury would consider [Citizens Bank’s] conduct 

looking back to 2008, which would have considerably altered 

the jury’s weighing of the claims and evidence.

Id. at 35-36.

If Appellant is claiming that it suffered prejudice because the summary 

judgment ruling limited its ability to present evidence related to events that 

occurred before the one-year look-back, this claim fails. To be sure, Judge 

Lutty’s summary judgment ruling only limited Appellant’s potential damages 

in this case – it did not limit the evidence that the parties were permitted to 

introduce. Indeed, at the beginning of the trial, Appellant’s attorney informed 

the trial court:

Yes[, Your Honor]. As [Citizens Bank’s attorney] said to Your 

Honor, while we are going to tell the facts going back 

to the beginning of the fraud, we’re only seeking damages 

and only mentioning specific damages for the 79 checks in 

the one-year look-back period consistent with Judge Lutty’s 

order.

. . .

We’re not going to make an argument that, gee, we’re 

entitled to [$]400,000, but we can only get [$109,000]. We 

understand it’s [$109,000] per Judge Lutty’s Order.
J-A26038-19

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Lutty’s and Judge Hertzberg’s thorough opinions and adopt them as our own. 

In any future filing with this or any other court addressing this ruling, the filing 

party shall attach a copy of Judge Lutty’s June 6, 2019 opinion and Judge 

Hertzberg’s June 4, 2019 opinion.

Judgment affirmed.

____________________________________________

I think both parties will be talking about the conduct over four 

or five years, but we will not ask for damages more than 

[$109,000], whatever the stipulated amount is.

N.T. Trial, 11/27/18, at 22 (emphasis added).

Further, in this case, the jury specifically found that Citizens Bank did not fail 

to exercise ordinary care. See Jury Verdict, 11/30/18, at 1. Therefore, since 

the summary judgment order only limited the potential damages that 

Appellant could receive and since the jury found that Appellant was not 

entitled to damages in this case, even if the summary judgment order were

erroneous, Appellant did not suffer any prejudice as a result of the error and 

it is not entitled to relief on appeal.

If, on the other hand, Appellant claims that the summary judgment ruling 

caused it to suffer prejudice because the ruling caused the jury to not “weigh[] 

Citizens [Bank’s] conduct of allowing these fraudulent ATM deposits for years 

against [Appellant’s] conduct,” this claim also fails. See Appellant’s Reply 

Brief at 9-10. This claim of prejudice would only be relevant as to the amount 

to which Appellant’s failure to exercise ordinary care contributed to its loss. 

Here, however, the jury simply found that Citizens Bank did not fail to exercise 

ordinary care. Therefore, and again, the summary judgment ruling did not 

prejudice Appellant.
J-A26038-19

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Judgment Entered.

Joseph D. Seletyn, Esq.

Prothonotary

Date: 3/10/2020
Circulated 02/21/2020 04:29 PM 

IN THE COURT OF COMMON PLEAS OF ALLEGHENY COUNTY, PENNSYLVANIA 

CIVIL DIVISION 

WELLINGTON ENERGY, INC., 

Plaintiff; 

CASE NO. GD 13-17836 

vs. 

Superior Court docket no. 499 WDA 2019 

CITIZENS.BANK OF PENNSYLVANIA, 

Defendant. 

vs. 

RAELISE OSTROWSKI, 

Additional Defendant. 

OPINION 

JUDGE ALAN HERTZBERG 

COPIES SENT TO: 

COUNSEL FOR PLAINT1FF: 

PATRICK CAVANAUGH, ESQUIRE 

3 PPG PLACE, SUITE 600 

PiTrsBURGH, PA 15222. 

COUNSEL.FOR DEFENDANT: 

KEVIN ALLEN, EsQUIRE 

US STEEL TOWER 

600GRANT STREET . 44m FLoOR 

. . ' . . 

PITrSBURGl-i, PA 15219 

RABUSE OSTROWSKI 

51 ?POIAND AVENUE 

STRUTHERS, OH 44471 
IN THE COURT OF COMMON PLEAS OF ALLEGHENY COUNTY, PENNSYLVANIA 

. CIVIL DIVISION 

WELLINGTON ENERGY, INC., 

Plaintiff ' . ' 

CASENO. GD 13-17836 

vs. 

Superior. Court docket no, 499·WDA 2019 

CITIZENS BANK OF PENNSYLVANIA, 

Defendant. 

Vs. 

RAELISE OSTROWSKI, 

Additional Defendant. 

OPINION 

Alan Hertzberg, Judge DateFiled: June 3, 2019 

Raelise Ostrowski, an employee of Wellington Power Corporation, forged 

indorsements on two hundredeighty-eight ofWellington Energy, Inc.ts checks, enabling 

herto steal $406,598�60.

1 Ms. Ostrowski forged the indorsemenrs from 2008 until she 

was caught in 2013. Ms. Ostrowski was Wellington Power's payroll administrator, 

whichmade her responsible for the payroll and''per diem'<reimbursementsas Wellington 

Energy's employees replaced.between eight and ten million electrical meters in. the State 

of California. Per diem checks, typically U1 the amount of $1�385 cir $1;551..66, 

reimbursed approximately fifteen or twenty employees monthly for their travel related 

expenses, such as mileage and housing. When Ms. Ostrowski.found that an employee 

receiving per diem reimbursements separated from Wellington by way of resignation, 

1 Wellington Energy .Inc. is a wholly owned subsidiary of Wellington Power Corporation. 

. . 1 
retirement ortermlnation, she would continue to have per diem reimbursement checks 

issued to them. 

Ms. Ostrowski then forged the indorsement signatures of the former employees on 

the backs of the checks and deposited them via automated teller machines into her own 

checking accounts with Citizens Bank and PNC Bank. For example, Zack Smith ended 

his employment with Wellington Energy in September of 2()09, but Ms. Ostrowski 

continued to have monthly per diem reimbursement checks issued to Zack Smithuntil 

July of2013, when Citizens Bank discovered that checks she was depositing had forged 

signature Indorsements. Ms. Ostrowski was then charged with the. crime of mail fraud 

(18U.S.C. §l341), pied guilty and served twenty-four out of a twenty-seven month 

prison sentence. 

In September of 2013, Wellington Energy.began.this civil.lawsuit against Citizens 

Bank of Pennsylvania by writ of summons, which was followed in December by a 

complaint. Among other things.jhe complaint alleged that Citizens Bank owed. 

Wellington Energy $366�485.32 for failing to exercise.ordinary care by accepting 

deposits. into Ms. Ostrowski 's account of checks made. payable to other individuals that 

contained forged signature indorsements .. Citizens Bank joined Ms; Ostrowski as an 

additional defendant, alleging she should indemnify or contribute towards any liability of 

Citizens Bank to Wellington Energy. In December of 2017, the Honorable Judge Paul 

Lu tty granted Citizens Bank's motion fot partial summary judgment by prohibiting 

Wellington Energy's claims arisingfrom all checks in bank statements made. availableto 

· Wellington Energy in July of 2012 or earlier. Judge.Lutty's ruling left intact Wellington 

Energy's claims from forged checks deposited between August.of 2012 and.July of 2013. 
The dispute over the reduced amount of $109�581.66 was assigned to me for 

resolution by way of ajury trial. After a trial of approximately three days, Citizens Bank 

withdrew its claim againstMs, Ostrowski. On Wellington Energy's claims against 

Citizens Bank; the J. ury returned a verdict in favor of Citizens Bank. Wellington Energy· 

then filed post-trial motions that requested a new trial due to. errors. allegedly made by 

Judge Lutty and I. After I denied the post-trialmotions, judgment was entered on the 

verdict and. Willington Energy filed a. timely appeal to the Superior Court of 

Pennsylvania. Wellington Energy also filed a timely concise statement of matters 

complained of on appeal. With the exception of the claim of error by Judge Lutty for 

granting partial summary judgment,

2 I address each alleged error below. 

Wellington Energy contends that I erroneously permitted Citizens Bank "to 

introduce as evidence customer agreements between other banks and their customers 

which were irrelevant, hearsay, unauthenticated; misleading and highly prejudicial,"? 

These customer agreements are relevant because ofthe Pennsylvania Uniform 

Commercial Code provisions that specify whether the employer or the depositary bank 

.has civil liability tor an mnorsement rorged by an employee. See .13 Pa. C.S.§§3405 and 

3103. The depositary bank will only be liable if, in taking a check for processing by 

automated means, it fails to exerciser'ordinary care;" which is defined as "observance of 

reasonable commercialstandards; prevailing in the area ... ;[which] do not require the 

bank to examine the instrument if the failure to examine does not.; vary unreasonably 

from generalbanking usage .... ;, Id, The customer agreements of Dollar Bank and Bank 

of America show those banks use the. same procedure as 'Citizens Bartle, which is to 

· 

2

• See 'II no. l in the concise statement of. matters complained of on appeal, Judge Lutty will lite ail opinion 

addressing the claim of error iii his granting partial summary judgment. 

3 See t no. 3 in .the concise statement ofmatters complained of ori appeal. 

3 . 

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perform no sight examinations of automated teller deposits (unless a check is for a very· 

large amount). While I prohibited the admission of customer agreements from 

Huntingdon and Citibank from 2018,

4 the Dollar Bankand Bank.of America customer 

agreements were from the appropriate time frame and therefore relevant to show whether 

Citizens Bank used similar standards in norexamining the checksdeposited by Ms. 

Ostrowski, Hence, the customer agreements with other banks were admissible and not 

irrelevant 

Concerning WelIU1gton Energy's argument thatthe customer agreements with 

. . 

other banks were hearsay, Pennsylvania Rule of Evidence no. 801( c)(2) excludes 

evidence-not offered "to prove the truth of the matter asserted" from the definition of 

hearsay. The customer agreements With Dollar Bank and Bank of America clearly were 

not offered to prove.the truth ofwhat the banks and their customers had agreed upon. 

Instead, they were offered to show that a Pittsburgh metropolitan area.bank and a large 

national bank handle automated teller machine deposits the same way as Citizens Bank .. 

See testimony of expert witness Cathy Glassman in the transcript of Jury Trial, Volume 

II, pp. 515�$16, 520-542 and 5:3.4-539. Therefore, the customer agreements between 

other banks were not inadmissible on the basis of hearsay. 

Wellington Bank's argument that Ole customer agreements with other banks were 

unauthenticated is.resolved by Pennsylvania Rule of Evidence no. 90.l(a). The rule allows 

the authentication requirement to be satisfied by the production of "evidence sufficielit to 

support a finding that the item is what the proponent claims.it is." Citizens Bank, the 

proponent; claimed the customer agreements with Dollar Bank and Bank of America 

4 Counsel for Wellington Energy describe.d the objection to the' time fi:a�e .of the Huntingdon and Citibank 

customer agreements, which l sustained, as "probably the most critical objection," Transcript of !.!lry Trial, 

Volume Il, p. 523. 

4 
were documents that were made publicly available by those banks. . See transcript of Jury 

Trial, Volume. II, pp. 521 and 535. Citizens Bank's expert witness, .Cathy Glassman, 

testified from her personal .knowledge that these customer agreements were made 

publicly available by those banks, which testimony I found credible. Id� Since testimony 

of a witness With knowledge that an item is what iUs claimed to be satisfies the. 

authentication requirement (see Pennsylvania Rule of Evidence no. 901(b)(2) ), the 

customer agreements with other banks were authenticated, 

Wellington Energy's final argument on the customer agreements with other banks 

is. that they are inadmissible because they are misleadingand highly prejudicial. 

However, the purpose for which they were admitted, to show other banks did not perform 

any sight examination of checks deposited by automatedteller, was acknowledged as 

correct by Wellington Energy's expert witness, Alan Slater, and its counsel.. See 

transcript of Jury Trial,VolumeII, pages420-428 and 531-532. 'Since Wellington 

Energy clearly agrees· other banks had the same practice of not sight reviewing checks 

deposited by automated teller.machine, there is no medt to its argument that admission of 

the other banks' customer agreements was misleadingand highly prejudicial. In addition, 

this agreement.by Wellington Energy thatother.banks do not conduct sight examination 

-of checks deposited by automated teller machines. would make any error in the admission 

.of the other banks' customer agreements harmless, 

The other trial error Wellington Energy contends I made allegedly occurred 

during Citizens B'111k's closing argument. Wellington Energy contends Citizens Bank 

violated my order granting a pre-trial motion in limine but I erroneously refused to give 

5 
the jury a limiting instructionor.declarea mistrial.

5 The origin of this alleged error is 

Ms; Ostrowski's successful depositinto herown checking account with P.NC Bank.via 

automated teller machine, ofsix Wellington Energy checks with forged indorsements. 

This led Wellington Energy to. initiate anot1ter civil lawsuit against PNC Batik via a writ 

of summons filed at docket no . .GD 14-23256. Six days before the. trial started, 

Wellingtcn.Energy .served Citizens Bank with a motion in limine to exclude all evidence 

of Ms .. Ostrowski depositing checksinto her PNC Bank checking account as well as the 

Iawsuirfiled by Wellington Energy against PNCBailk. See entry no, 52 filed. l\130/2018 

in the Department ofCourtRecords.docket. 

Wellington Energy argued in the motion in limine that the mention of another 

bank and another lawsuit could confuse the issues or mislead the jury (see Pennsylvania 

Rule of Evidence no. 403) to view Wellington Energyvas a frequent litigant or believe 

that Wellington will recover funds from another entity." Motion in limine, 11 no. 33. 

After on-the-record argument of the motion, 1 signed an order that prohibited reference to 

the lawsuit against PNC Bank bot permitted evidence of the deposit of the checks irtto 

Ms. Ostrowski's PNC Bank checking account. During the trial; Wellington Energy 

expert Alan Slater testified that Citizens Bank decided sight examination of. automated 

teller deposits would be more expensive than accepting responsibility when a check with 

a forged indorsement ls deposited into an account bearing.a name different than the payee 

on the check. Mr. Slater further testified that the failure of Citizens Bank to accept 

responsibility, by paying Wellington Energy for its losses that sight examination would 

have prevented, violated banking industry standards, SeeJtaJ1sc:ript of Juty Trial, 

Volume IJ, pp. 447w453. On cross examination; Mr. Slater testifiedthathe would expect 

5 See 11.no. 2 in the concise statement. of matiers complained of on.appeal, 

6 
PNC Bank to be in the Same position as Citizens Bank and also accept responsibility for 

not conducting sight examinations of automated teller deposits. The.cross examination 

continued as follows: 

Q. So you would expect PN.C to have pai<l out on a claim to Wellington; 

righ .. t? . n . 

A; I would have expected that they would or considering it's in a big binder, 

I'm assuming they're suing also. 

Q; Do you knowif PN(; has done that, sir? 

A. I have no idea. 

Id.,p. 473. 

Throughout the trial; there was no testimony or other evidence produced by 

Wellington Energy that PNC Bank had followed what. Mr, Slater testified was a. banking 

industry standard by reimbursing Wellington Energy for the six checks. Ms. Ostrowski 

deposited into her PNC Bank account. Hence, in.the dosing argument; Citizens Bank 

pointed outthelack of evidence supporting Mr. Slater's testimony that it was industry 

practice to pay back losses from. fraudulent automated teller machine deposits. Its· 

counsel told the jury Mr. Slater. failed to.identify any specific bank that has. a practice of 

paying back losses. from fraudulent automated teller machine deposits and that there was 

no evidence introduced that PNC Bank paid Wellington Energy for the six checks 

deposited.into Ms. Ostrowski 's PNC Bank account. See Id., pp; 743- 752. 

My ruling on the motion in limine, comprised of language proposed by 

Wellington Energy, states: 

"No party may refer to the Iawsuitfiled by Plaintiff against PN.C: Bank in 

the Court of Common Pleas. of Allegheny County; Pennsylvania atdocket 

number GD 14-023256.'; 

Entry no. 54.filed 12/03/2018 in the Department of Court Records docket While 

Welli�gton Energy alleges Citizens. Bank violated this ruling; I disagree. There was no 

7 
. reference to the lawsuit.against PNC Bank made during Citizens Bank's closing 

argument, Wellington Energy's witness, Mr. Slater,spoke. the onlywords that rt.light be 

construed to reference a lawsuit againstPNC.Bank during the.exchangequoted above. 

Then, Citizens Bank's counsel scrupulously observed my ruling by not delving into the 

PNC Bank lawsuit; but instead asking only if.Mr; Slater. knew if PNC had paid 

Wellington Energy. Additionally, the premise for.my ruling on the motion in llmine was 

not to confuse or mislead the.jury to view Wellington Energy as a frequentlitigant or 

believe it will recover funds from an entity other than Citizens Bank, and there was no 

testimony or argumentto that effec:t. Indeed, Citizens Bank did not violate my ruling on 

the motion 'ihliflline. Therefore, .I correctly denied WeUington Energy's request.for a 

mistrial or a liiniting instruction, 

BYTHECOURT: 

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.. 

Circulated 02/21/2020 04:29 PM 

[N THE COlJR T OF COMMON PLEAS.OF ALLE,GHENY'COUNTY, PENNSYLVANIA 

'Wellington Energy, Inc., 

Piaintiff, 

vs. 

Citizens Bank of Pennsylvania, 

Defendant, . 

vs. 

Raelise Ostrowski, 

Additional Defendant. 

CIVIL DIVISION 

No. GD 13-17836 

OPINION 

HOR PAUL F. LUTTY, JR_ . 

Copies Sent.Via First-Class Mail to: 

Patrick.K. Cavanaugh, Esquire 

William S. Stickman, IV, Esquire 

Del Sole Cavanaugh Stroyd LLC 

3 PPG Place . Suite 600 

Pittsburgh, PA 15222 

Raelise Ostrowski 

517 Poland Avenue 

Struthers, Ohio 44471 t.O . . 

-n 

�· !- 

rn 

0 
,.. 

IN. THE COURT OF COMMON PLEAS OF ALLl:GHENY COUNTY, PENNSYLVANIA 

Wellington Energy, lnc., 

Civil Division 

Plaintiff, 

. v. 

Noi13·1783.6 

Citizens Bank of Pennsylvania; 

v. 

Rael.ise. Ostrowski, 

.Additio.nal Defendant, 

LUTTV, JR�� J. 

.OPINION 

In the Concise Statement of Matters Complained ofon Appeal, Appellant, We_llington 

. . 

Energy, lnc., (Wellington), Plaintiff below, includes andextends the· Complaints attributed to 

the Trial Judge, adding an issue on Appeal attrit,,.ute� to this General Argument Judge, Paul F. 

Lutty, Jr., Who �eard Argument on Defendant Citizen's Motion for Partial Summary 

Judgment on December 11, 2017. Appellant contends the following;· . 

1. Did. the Court err wen it applied the facially inapplicable provisions.of 13 Pa.· 

(:;S,A.; section 4406{f}, to grant p�rtlal summary Judgment' and; thereby, to 

limit the scope of Wellington' s.cla lms to a one year lookback period? 

1 

··-···-········--- ·--------------------------------·----- 
. . • ·. 

• 

ANSWER:· Judge Lu tty properly applied the provisions of 13 Pa.C.S;A; Se.ction ,4406(f) 

to afford Defendant/Appel lee Citizenisa defense to Wellington's clalrns against Citizens Bank,. 

as assert�d in the Complaint. 

ANAL VIS 

FromJ_Lily 19, 1999; until June 24, 2013, WeUingtqnemployed Raelise Ostrowski, as a 

secretary, payroll adminlstratcr and executive asslstant. Be�inning in 2009, Ostrowski 

fraudulently issued checks from Wellington to former Wellington employees, in the course of 

her normal d μties, in proces$ing: per diem payments. Until July of 2013, Ostrowski issued 

approxhiiately 258 checks to ex-emplovees to bed rawh from Wellington's bank account at 

. First Niagra Bank. 

Ostrowski then endorsed the checks and deposited them into her personal account 

in either Citizens.or.PNC Bank.via automated teller machines (ATMs). Citizens forwarded 

checks to.Flrst Niagra for payment. First Nlagra honored the checks and debited Wellington's 

.' aecount for the checks, Al tho ugh Wellington's loss was attributed to First N iagra' s. payment of 

·. 

the checks, as well as Wellingtorl's. failure to supervise Ostroski, safeguard its checks, and 

reviewand timely reportany.unauthorized activi,:Y associatedwith ltsbank account, Plain�iff, in 

its .Complaint, .sought to shift ·responsibility for the above negligence and Ostrowski' s crimin.al 

co nduct to Appellee citizens .• 

In late July of 2013., Citizens.discovered and: reported the suspicious activity to 

Plaintiff's employee, Mr. Huber, ostrcwskl'sscpervlser: Huber testified that Ostrowski 

depqsited $370,000.00 into her Citizens Bank account arid $37;000.00 into her PNC account. 

Although Huber was responslble for reviewing and reconciling Wellington's account statements 

2 
and .evaluating all of its tra n$.actions, he never disc.overed that Ostrowski had issued checks to 

persons who no longer worked for Wellington. When contacted by Citize.ns in July of 2013, 

Huberinformed Citizens tha.t Wellington had not authorized ariy checks flagged by Citizens as 

suspicious. At a meeting; Ostrowski admitted to her fraudulent check scheme and pied guilty 

and was sentenced. 

Wellington filed claims against both depositor banks. It included claims of conversion 

agalnst Appellee under 13 Pa. C.S,A. Section 3420, Fictitious Payee under 13 Pa .c.S.A, Section 

3404(d), Payment for Fru�ulent lndcirsement under 1.3 Pa.C.S. Sectibn 3405 (b) and Breach 

of Presentment Warranty under 13 Pa.c.s. Section 3417 .. After pleadings were closed: and 

discovery was taken, Citizens moved for Par:fial Summary Judgment, citjng the notice-pe,riod 

under Sectlen 4406(f), whi.ch is precedent to an action in Pennsylvania, Which unlike a statute 

.of limitations; cannot be tolled, Bucci v. Wachovia Bank.N;A., 591 F: Supp. 2d 773 (E.D. Pa. 

2008). Once the bank fulfilled its requirement of providing customer with. a sufficiently 

informative statement, the custome.r has one year to provide bankwith notlce.ef alteration, 

regardless of whether alteration was reasonablydeciphererabie. Environmental Eg uipment 

. and Service Company v. Wachovia Bank. N .A,. 741.F. Supp. 2d · 705 (E,D, Pa. 2010) •. 

Appella nf agued in response to Ci�izen's Motion that Qnly customers of thelr own bank 

are bound to. discover and report fraudulent transferswit-hin cine year of receipt of their bank's 

statement. Appe.llant had examined the statements of First Niagra, between 2009 and July of 

2013, a�d failed to discover any lnccnsistencles or suspicious transactions. Appellant did not file 

clalrns against First Niagrafor its fallure to discover any suspicious transactions before payment, 

perhaps realizing that their claims against First Niagra would have been 1.imited to transactlons 

. between July of 2012 and July of 2013. Nevertheless, it would surely frustrate the policy of the 

3 
UCCto encourage customers to promptly examine theiraccountstatementscmd timely no.tify 

the drawee bank of forgeries and alterations Within one year if courts. permitted 

customers/drawers to c;ircumv.ent the obligations imposed upon theniby Section 4406:by 

pursuing claims directly against depositorv banks after the expiration of the. one year limitation 

precluded if asserted against the payor bank. 

AsWellington argued in its Motion, the UCCseeks to discourageJraud by allocf!ting 

losses to the party whose negli_gence allowed the schemeto succeed or was in the best position 

to prevent the.occurrences. Menichine N. Grant 995 F ._2d 1224, 1234 (3d Cir.1993). The 

application of Sectio�4406(f) toclalrns against depository banks is in harmony with the ucds 

intent to, where approprlate.ellccatelcss �etween the drawer, drawee/payor bank and the 

dep?sitor ban k. W�llingtoo' s argument ignores various .authorlties, including the UCC itself, 

that support the.posltlcn thatthe Section 4406 defenses are fully available to qepe>.sitory banks, 

such as Appellee Citizens 13 Pa. CS.A. Section 3417(c) permits defenses to breach of 

presentation ot'warranty as alleged here and the warrantor.euch as Citizens niay defend by 

proving that.for example, the indorsement Is effective under Section 3404, relating to 

imposters, fictitious payee or 3405; employer's responsibili.tyfor the fraudulent mdcrsement by 

. employee or the drawer is precluded under section 340_6: relating to· negligence contributing to. 

the forged si�nature or alteration of the instrument or4406 relating to the duty of the 

customer to discover and report unauthorized signatures or alterations. wlthin.ene year. 

Comment 6 to Section 3417 C states �s follows: . . . 

6. Subsection C applies to checks and other unaccepted drafts. It gives the warrantor 

. . 

the benefit of rights that the d rawe� has against. the drawer u ncler Sections 3404; 3405, 

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,:-•. 

• 

3406 or 4406. If the drawer' s corid uct. ccntributed to. a loss from .a forger or �lterc:ation, the 

drawer Should not be allowed to shift the loss from the drawer to the warrantor. . .• . ' . . . . . . 

Therefore, under Pennsylvani� law; thedepository·bank, as the warrantor may raise any 

defense against drawersthat are otherwise available tothe drawee� w.hich paid checks 

presented with forged indorsements. Nisenson v. Morgan Stanley DW; Inc., 546F. Supp, 2d 

i13(E.D. Pa; 2008). 

Thus, under Pennsylvania law; Citizens can raise anydefense First Niagra could have 

raised had Wellington pursued any claims against them. The law preserves the UCC's.intentto 

; 

properly and fairly allocate the loss between the drawer, the d rawee/payor bank and the 

depository bank. 

After considering the parties Motions;Briefs and Argument thereon for and against 

the application .of the one (1) year notice requirement, this Court found in favor of Defendant/ 

Appellee, Citizens Bank;- 

Of course, this Court's. dec::lsfon was .based solely on the proper application oftheJaw . . . 

. . 

and made no conclusions as to.which p�rty was in the best pe>sition to detect the fraud. As 

. . . Wellington argued, "FinaUy, thedetermlnatlon-cf who was in the best position to detect.the 

fraud atissue is highly fact intensive and can only be resolved by the jury". See Wellingt�n Brief 

in opposition to Motion for Partial Su�mary Judgment. 

On November 30, 2018 the jury found un.animously that Citizens.did not fail'to exercise 

ordinary care With respectto.the checks deposited by Ostrowski into her Citizen's account via 

Citizens automated teller maehtnes, 

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" 

In conclusion and for the foregoing reasons, Third Circuit Court's Order dated December 

· 11,201s. barringWeUingtonls clalrns based on checks appearing on bank statements made 

available to Wellington in July 20.12 or earlier should .. b.e affirmed. 

By:the Court: 

Dated: 

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